BANK OF NOVA SCOTIA $69(Toronto symbol BNS; Income-Growth Portfolio, Finance sector; Shares outstanding: 1.2 billion; Market cap: $82.8 billion; Dividend yield: 4.9%; Dividend Sustainability Rating: Above Average; www.scotiabank.com) is the third-largest of Canada’s five big banks with assets of $946.7 billion.
Bank of Nova Scotia last raised its quarterly dividend by 3.7% with the August 2018 payment. Investors now receive $0.85 a share instead of $0.82. The new annual rate of $3.40 yields a high 4.9%.
The bank has completed several acquisitions in the past few months. Those include buying 68.19% of BBVA Chile for $2.2 billion U.S. BBVA is the South American country’s sixth-largest bank.
In May 2018, it paid $950 million in stock for Jarislowsky Fraser. The Montreal wealth management firm caters to institutional investors and high-net-worth individuals.
Bank of Nova Scotia also recently completed its purchase of MD Financial Management, which sells wealth management services to Canadian medical doctors and their families. The bank paid $2.6 billion in cash for that privately held firm.
Jarislowsky and MD Financial have a total of roughly $78 billion in assets under management (AUM). That will raise the bank’s total AUM to $233 billion.
For the fiscal 2018 third quarter, ended July 31, 2018, Bank of Nova Scotia earned $2.19 billion. That’s up 7.4% from $2.04 billion a year earlier. Due to more shares outstanding, per-share earnings rose by 4.8%, to $1.76 per share from $1.68. Revenue improved 3.3%, to $3.37 billion from $3.25 billion.
The new operations should push up the bank’s projected earnings from $7.01 a share in fiscal 2018 to $7.48 in 2019. The stock trades at just 9.2 times the 2019 estimate.
Bank of Nova Scotia is a buy.
BANK OF MONTREAL $100(Toronto symbol BMO; Income-Growth Dividend Payer Portfolio, Finance sector; Shares outstanding: 640.1 million; Market cap: $64.0 billion; Dividend yield: 3.8%; Dividend Sustainability Rating: Highest; www.bmo.com) is Canada’s fourth-largest bank, with assets of $765.3 billion.
Canadian retail banking operations supply 41% of the bank’s earnings, while its U.S. operations contribute 22%. Bank of Montreal gets another 19% of its earnings from its capital markets operations, which sell brokerage and securities-trading services. The remaining 18% come from wealth management services.
The bank last raised its quarterly dividend by 3.2% with the May 2018 payment. Investors now receive $0.96 a share instead of $0.93. The new annual rate of $3.84 yields 3.8%.
If you disregard one-time items, Bank of Montreal earned $1.57 billion, or $2.36 a share, in its fiscal 2018 third quarter, ended July 31, 2018. That’s up 13.9% from $1.37 billion, or $2.03 a share, a year earlier. Revenue improved 6.6%, to $5.82 billion from $5.46 billion. The improved results are mainly due to higher interest rates and loan balances.
Bank of Montreal has now completed its acquisition of KGS-Alpha Capital Markets. Based in New York City, this privately held firm provides brokerage services to institutional investors such as pension plans. It specializes in mortgage and asset-backed securities.
The bank has yet to reveal how much it paid for that business. However, the new operations complement its existing brokerage business in the U.S. The purchase will also give the bank access to KGS-Alpha’s high-quality clientele.
Overall earnings will likely improve from $8.95 a share in fiscal 2018 to $9.59 for 2019. The stock trades at just 10.4 times the 2019 forecast.
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